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Referral vs. Affiliate Marketing: Key Similarities & Differences

January 13, 2021

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If you’re familiar with affiliate marketing, you know its strengths and capabilities as a brand-building tool. Networks like Refersion can teach you how to create affiliate links while making it easy to find and hire affiliates for your next campaign. But even if you know the world of affiliate marketing, you’re probably also aware of referral marketing.

While the two terms are used interchangeably in the public sphere, there are differences between them. How exactly do you compare referral vs. affiliate marketing, though? The differences might be slim, but they make all the difference when executing a brand marketing campaign.

What Is Referral Marketing?

Referral marketing runs on personal interactions and shared relationships. The marketing method works by enlisting existing customers to promote your brand to friends, family, and associates. They’ll expect a reward if they are successful in converting one of those people in their life. The benefit here is that the customer referring your brand to other people receives a kickback with every referral they make; meanwhile, you’re receiving conversions, thanks to simple word of mouth engagement.

The statistics speak for the benefits of this approach, with referred customers saying they are 18% more likely to continue shopping with a brand and 74% of consumers identifying word of mouth as a key influence in the purchasing process. The biggest benefit of this program is the number of rewards it offers: consumers receive a reliable referral; customers receive a discount, credit, or upgrade; brands get more conversions, growing their audience and having more customers to return to for future referrals.

What Is Affiliate Marketing?

Affiliate marketing differs from referral marketing in its approach to “referrals.” Rather than asking customers to refer a friend or family member, affiliate marketing works by developing a business relationship between your brand and an affiliate. This type of performance-based marketing relies on paying an affiliate to promote your brand, where they are compensated for each predetermined action that is completed by a consumer.

Many brands will employ affiliate marketing programs once they find that organic marketing methods don’t always cut it by themselves. The affiliate approach allows you to hire professional affiliates who will promote your brand to their audiences, whether that affiliate is a fellow brand, a website, or an influencer. Best of all, you only end up paying when an action is completed by a consumer, whether that is clicking on an affiliate link, visiting your brand’s webstore, or completing a purchase (conversion).

This ensures you get the most out of the money you put into your marketing efforts. And affiliate tracking software like Refersion allows you to effectively track the progress of your marketing efforts and affiliates, making it easy to implement adjustments as needed.

Referral vs. Affiliate Marketing

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When weighing the comparison of referral vs. affiliate marketing, you need to consider the differences more than the similarities. These include:

Audience

  • Referral Program: Incentives offered by your brand often hit a limit, where a customer will need to recommend a certain number of friends (e.g., 2–3) to receive their reward. This makes sense, as customers will have a limited pool of people to talk to, whether that is family or friends or work acquaintances.
  • Affiliate Marketing: The size of the audience is as wide as the affiliate’s existing network — which, for brands and influencers, can be incredibly large. This is a great opportunity at your disposal, as it provides you a much larger pool of consumers to work with, potentially increasing conversion rates.

Engagement

  • Referral Program: Engagement depends on the reference and the people they are talking to. The more someone trusts them, the more likely they are to complete the referred action.
  • Affiliate Marketing: Engagement can be quite high, depending on the type of affiliate you are working with. If they are known for their authenticity, it’s likely that their audience will engage with whatever brand they are promoting, solely off of word of mouth.

Conversion Rates

  • Referral Program: Engagement might be lower than affiliate marketing, but conversion rates could be higher due to the level of intent, thanks to word of mouth.
  • Affiliate Marketing: Even if you don’t receive a lot of sales conversions from your affiliate campaign, you’re bound to have a notable increase in traffic to your website. You’ll have to consider your goals relative to this. On the other hand, you could consider offering consumers better deals, thus increasing the rate of them clicking on an affiliate link and completing a sale.

Knowing Which Marketing Approach Is Right for Your Business

While the two approaches might be similar, there are significant differences that make referral and affiliate marketing functionally different. If you’re unsure where to start, consider implementing a campaign for each. With Refersion, you’ll be sure to launch your first affiliate marketing campaign with ease.

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Written by

Ruthie Carey
Ruthie Carey